CFPB Overdraft Protection

In February, the Consumer Financial Protection Bureau (CFPB) issued a Notice and Request for Information (Notice) for feedback from consumers and banks on overdraft protection programs (ODP).  Following requests from several stakeholders, the CFPB agreed to extend the April 30th deadline for response to June 29th.  

IBAT urges each of its members to take advantage of this opportunity to make their voice heard in advance of the CFPB issuing rules or guidance affecting ODP. The Notice includes 12 questions regarding ODP, most of which need to be answered with information known only to banks offering ODP. Please forward this Notice to your Head Cashier, Chief Operations Officer, and/or Compliance Officer and ask them to prepare answers to these questions on or before June 29th.  Consumers will likely respond in large numbers; it is important that the CFPB receive reasoned, knowledgeable answers to the questions from community banks.

On April 30, IBAT filed a comment letter in response to the CFPB’s request for information, asserting to the CFPB that the FDIC’s statistics on ODP reflect a product that is working, not failing.  IBAT’s letter informed the CFPB of the background of overdraft payments, consumer alternatives, customer disclosures and information resources, data processing and technology challenges, the economic framework, promotion of responsible use, heavy users, and daily limits.  The letter concluded by stating that overdraft protection is working for the vast majority of customers, and requesting the CFPB to issue guidance recommending (1) customer disclosures for customers with ODP and (2) a fresh start loan approach for those ODP customers who don’t bring their accounts current.

Bank responses to the Notice will focus on the specifics of your overdraft program.  To assist you in drafting a response to this, and other comment requests, IBAT recently published helpful tips in the May/June edition of The Texas Independent Banker magazine.

IBAT Concludes Record DC Visit

Over 130 Texas community bankers and industry partners concluded two days of Hill visits and discussions with all of the federal regulatory agencies last week as part of a nationwide fly-in sponsored by IBAT and ICBA. IBAT bankers visited some 30 members of the Texas Congressional delegation in efforts to promote issues unique to community banks including a host of bills that would provide targeted regulatory relief and to work against efforts by credit unions to expand their member business lending (MBL) authority.

“It was gratifying to see the offices packed with Texas community bankers,” said IBAT President and CEO Chris Williston. “Texas can be proud that our record-breaking crowd accounted for almost 15% of the bankers attending from across the country, and we are in the debt of so many who took the time to participate in the event largely at their own expense.”

In addition to the Texas Congressional visits, participants were treated to a group session to hear addresses by Texas Representatives Pete Sessions, Randy Neugebauer, Jeb Hensarling, Ruben Hinojosa, Francisco “Quico” Canseco, along with Chairman of the House Financial Services Committee Spencer Bachus (R - AL), and senior Senator Kay Bailey Hutchison. Additionally, House Financial Services member David Schweikert (R - AZ) offered his observations on community banking and the legislative process. Group meetings were held the following day with the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, FDIC and Federal Reserve.

The annual Washington Policy Summit is one of IBAT’s most important legislative events and has occurred in the spring for the last 20 years, each year exceeding the previous year’s participation.  Our sincere thanks again to all of our IBAT members who participated in this important and impressive showing of commitment to our industry.

Senior Housing Crime Prevention

Recently, the IBAT Education Foundation Board voted to support the Senior Housing Crime Prevention Foundation (SHCPF) Project, a nationally acclaimed Senior Crimestoppers program for nursing homes in your community. Banks earn CRA credit by providing the nationally acclaimed Senior Crimestoppers program to nursing homes and veterans homes in their communities. We know that this is a non-traditional way for a bank to earn CRA credit, but the success over the last ten years can be seen through the credit banks have received by all of the federal regulatory agencies and the positive public relations exposure the bank partners have received for protecting their local elderly population. See the comments below:

"The FDIC has been a strong supporter of the Foundation and remains committed to helping protect some of the most vulnerable members of our society, senior citizens. I am pleased that the banking industry continues its support of the Foundation’s important work. I would like to commend banks for their participation."
Martin Gruenberg, FDIC

"The OCC has a long history of supporting the mission of the Foundation by providing positive CRA consideration for loans and investments banks make in the Foundation. I think that one of their greatest assets is to allow banks different options to loan or invest funds and the type and amount of CRA consideration depends on the option the bank chooses, through either a community development loan or a qualified CRA investment."
Grovetta Gardineer, OCC

"The Foundation is making a difference in the lives of low and moderate income seniors in nursing homes and the Federal Reserve Bank continues to recognize this in the public CRA performance evaluations of financial institutions in the Foundation. I want to thank you for supporting the Foundation and in turn improving the lives of senior citizens. Thanks for all the good work you are doing in supporting the Foundation."
Timothy Burniston, Federal Reserve

Over the past 10 years, 20 Texas community banks have participated in the program with good results. Our hope is to expand community bank involvement to 20 more banks by December 2012. For information about the program, visit the official website or call Peter Gwaltney or Sue Shaffer at 877/232-0859.  For information about Texas bank experiences with the program, contact Mary Lange at 800/749-4228.

New Tax on S Corporations Proposed

As lawmakers scramble to find $6 billion to pay for a one-year extension of the Stafford student loan rates, they’ve turned their attention to S corporation businesses as one source of funding.  Under the tax code, S corporations are not subject to corporate taxation, and the profits and losses of the corporation are realized on the individual tax returns of the shareholders.  The new tax, proposed by Senator Harry Reid, would require S corporations with three or fewer shareholders who declare at least $250,000 a year to pay employment taxes on that income.  
Since 1998, financial institutions have been eligible to organize as S corporations.  According to the Federal Deposit Insurance Corporation (FDIC), there are 272 such banks in Texas and 2,299 nationwide.  
IBAT opposes any restructuring of the tax liability of S corporation shareholders and, in particular, the subjection of S corporation earnings to payroll taxes, as has been proposed here and before.  

Fun Fact Friday

By the end of the Civil War, between one-third and one-half of all U.S. paper currency in circulation was counterfeit. On July 5, 1865, the Secret Service was created under the U.S. Treasury Department. In less than a decade, counterfeiting was sharply reduced. In the past ten years the breakdown of denominations counterfeited has changed dramatically. The total of known $50 and $100 notes counterfeited has increased by sixty percent. The total number of fifty and one hundred dollar notes passed and seized in 1980 was 777,957. The total number of fifty and one hundred dollar notes passed and seized in 1990 was 1,240,840. In 1990, thirty-six percent of the dollar value of known counterfeit currency passed in the U.S. was produced overseas, particularly in Colombia, Italy, Hong Kong, the Philippines and Bangkok. One hundred and thirty-nine domestic counterfeit operations and eighteen foreign counterfeit operations were suppressed in 1990.

Source: Federal Bank of San Francisco

CFPB Warning

The Consumer Financial Protection Bureau (CFPB) announced that it will use all available legal avenues, including disparate impact, to pursue lenders who allegedly discriminate against consumers. The CFPB also compiled tips and warning signs to help consumers identify and avoid credit discrimination.  In a Compliance Bulletin, which applies to all institutions under the Bureau’s jurisdiction and applies to credit products including overdraft protection programs, mortgages, credit cards, student loans, and auto loans, the CFPB recognized the applicability of the disparate impact doctrine to prove discrimination under the Equal Credit Opportunity Act. 

While we disagree with this conclusion relating to disparate impact, we are not surprised.  This follows closely on the heels of public statements from Assistant Attorney General Tom Perez, who heads up the Civil Rights Division of the Department of Justice.

In an op/ed in American Banker yesterday, Mark Olson, former Federal Reserve Board governor, characterized recent actions by the CFPB as a venture into “vigilante territory,” likening them to “frontier justice.”

ATM Fee Notice Requirements

Legislation sponsored by House Financial Services Committee members Blaine Luetkemeyer (R-Mo.) and David Scott (D-Ga.), and cosponsored by six congressmen, including members Francisco “Quico" Canseco (R-TX) and Ted Poe (R-TX), would repeal the requirement that physical notice of ATM fees be posted in addition to on-screen notices.  
The Electronic Funds Transfer Act (EFTA) created the requirement for duplicative notices on each ATM machine. If an ATM operator fails to have either of these notices on an ATM, EFTA permits individual and class actions. Recovery under a class action may not be more than the lesser of $500,000 or 1 percent of the operator’s net worth, plus attorney’s fees and costs.

Because a consumer can’t complete an ATM transaction without receiving the on-screen notice, IBAT has long contended that permitting monetary recovery for a missing physical notice is unfair to ATM operators.  We encourage you to contact your member of Congress to ask them to end these frivolous lawsuits by supporting H.R. 4367.

2012 Leadership Conference

The 2012 Leadership Conference is quickly approaching! Mark your calendars – June 14-16, at The Woodlands Resort and Conference Center.

The Leadership Conference is designed to inspire and involve leaders of community banks. Whether you are a President/ CEO or an up and coming employee, you are encouraged to attend and be inspired to become a more enthusiastic leader with the Leadership approach to opportunity, attitude and quality service.

If you are interested in sponsoring, advertising or exhibiting at the event there is still time!

Registration is now open.

Congressional Visit

More than 130 bankers and industry partners will be in DC next week for visits with members of the Texas Congressional delegation.  The visits will coincide with a nationwide fly-in (April 24-26) of community bankers across the country attending the Independent Community Bankers of America Washington Policy Summit.  In addition, meetings are planned with senior officials of each of the prudential regulatory agencies and the Consumer Financial Protection Bureau.

"We are gratified with the excellent response from the membership. Grassroots contact is key if we are going to continue the momentum and increase the understanding that community banks represent Main Street and not Wall Street among our elected members of Congress," said Chris Williston, President and CEO of IBAT.  

Bankers will be discussing a multitude of policy issues important to community banks including advocating for meaningful regulatory relief, discouraging legislation to expand credit union business lending and encouraging lawmakers to extend the Transaction Account Guarantee (TAG) program due to expire at the end of 2012.  A complete summary of the issues to be discussed can be found here.

IBAT encourages bankers who are unable to make the trip to familiarize themselves with these issues and to reinforce their importance with Congressional representatives in district meetings back home.

IBAT Embarks on Main Street Tour

IBAT's Steve Scurlock and Mae Beth Palone recently accompanied Texas First Lady Anita Perry and members of the Texas Historical Commission on the annual Main Street Tour.  This was the 18th consecutive year that IBAT has sponsored this tour which recognizes Texas’ cities and towns for their downtown revitalization efforts.  Local community banks participate in these restoration efforts by providing low interest loans to help in revitalization efforts.  The group began its tour in San Angelo which has been designated as a Texas Treasures City.  The group later visited Victoria where Mrs. Perry applauded the city for its designation as a 2012 Texas Main Street City.

Photo: Several local San Angelo area banks participated in the festivities. Pictured with IBAT Executive Vice President Steve Scurlock are l-r John Childers, Bank of San Angelo; Gary Cox, Texas State Bank; and Dean McIntyre, First State Bank.  Other participating bankers not pictured in photo include Don Johnston, American State Bank; Todd Huckabee and Debbie Long, Crockett National Bank; Joey Davis, Bank & Trust, ssb; and Jay Freitag, First National Bank in Sonora.  Also on hand for the celebration was IBAT Associate Member Will Welch of CalTech. 

Coloring Pages for April Campaigns

As we continue to celebrate Community Banking Month and Financial Literacy Month throughout the month of April, IBAT has teamed up with The Genesis Group to provide free coloring pages for you to share with your customers. 

In addition to the coloring pages, The Genesis Group has developed a number of customizable resources (sample counter card) for you to use in your promotion of the two April campaigns. Click here for information on purchasing additional resources.

Nonresident Alien Deposits

Over the longtime staunch opposition of IBAT and other banking trade groups, the IRS, as anticipated, issued a final rule last week to require reporting of interest earned on nonresident alien deposits.  You may wish to review IBAT’s comment letter on the rule for background and a recap of our concerns.  While not an issue for most of our banks, this is a blow to those community banks with this category of deposits as a significant part of their funding mix.  

We are hopeful that pending legislation to prohibit the IRS from collecting this information will be successful, and negate what we believe to be misguided policy from the Treasury Department.  

Guidance on the final rule is available here.

The rules are applicable to nonresident alien accounts beginning January 1, 2013.  We will provide additional information as it becomes available.